Revision under section 263 needs minimum enquiry; year-end TDS provisions were protected, but depreciation and interest issues sustained revision.
Revision under section 263 requires the Commissioner to make at least minimum enquiry and show that the assessment order is both erroneous and prejudicial to the Revenue. On year-end provisions, no revision was sustainable because TDS was deducted when bills were received, tax was paid before the return due date, and the amended section 40(a)(ia) provisory scheme, treated as curative and retrospective, protected the claim. On the effluent treatment plant depreciation issue, revision was upheld because the invoice dates raised a factual question about whether the assets had been put to use for the prescribed period. Revision was also upheld on interest under section 244A, as the allowance was treated as an incorrect record-based grant.
Issues: (i) Whether revision under section 263 of the Income-tax Act, 1961 was valid in relation to disallowance of TDS on year-end provisions under section 40(a)(ia) read with section 194C(2); (ii) whether revision under section 263 was valid in relation to 100% depreciation claimed on the effluent treatment plant; and (iii) whether revision under section 263 was valid in relation to allowance of interest under section 244A.
Issue (i): Whether revision under section 263 of the Income-tax Act, 1961 was valid in relation to disallowance of TDS on year-end provisions under section 40(a)(ia) read with section 194C(2).
Analysis: The revision on this point was founded on audit observations and a view that tax should have been deducted on provisions created on estimated basis. The record showed that the provisions were made for expenses where bills had not yet been received, that tax was deducted when the actual bills were received, and that such tax was paid before the due date for filing the return. The amended provisory scheme of section 40(a)(ia), treated as curative and retrospective from 01.04.2005, also meant that no disallowance was warranted where TDS was paid within the permitted time. The Commissioner did not conduct the minimum enquiry required before invoking section 263 and did not establish that the assessment order was both erroneous and prejudicial to the interests of the Revenue.
Conclusion: The revision on the TDS/year-end provisions issue was not sustainable and was set aside in favour of the assessee.
Issue (ii): Whether revision under section 263 of the Income-tax Act, 1961 was valid in relation to 100% depreciation claimed on the effluent treatment plant.
Analysis: The Commissioner relied on invoice dates suggesting that some assets may have been put to use for less than the prescribed period. That issue required factual verification and the assessee did not effectively controvert the preliminary inference drawn from the record. The matter therefore involved a proper basis for revisional interference.
Conclusion: The revision on the depreciation issue was upheld and the assessee's challenge failed.
Issue (iii): Whether revision under section 263 of the Income-tax Act, 1961 was valid in relation to allowance of interest under section 244A.
Analysis: The grant of interest was treated as an incorrect allowance detected on examination of the records. Although the assessee suggested a rectification route, the error was not treated as beyond revisional correction, and the assessee accepted the Commissioner's action on this point.
Conclusion: The revision on the section 244A interest issue was upheld against the assessee.
Final Conclusion: The revision was invalid only on the TDS year-end provision issue, but it was sustained on the depreciation and section 244A issues, resulting in a partial allowance of the appeals.
Ratio Decidendi: Revision under section 263 requires the Commissioner to establish, by at least minimum enquiry, that the assessment order is both erroneous and prejudicial to the interests of the Revenue; where the assessee's view is a plausible one and statutory amendments or record material support it, revision cannot be sustained merely on suspicion or audit objections.